The Australian Securities and Investments Commission (ASIC) has announced that it intends to extend the interim class order granted to lawyers and litigation funders involved in legal proceedings.
The extension has been granted until 30 June 2011, which means litigation funders can continue to operate without compliance to the Corporations Act 2001. ASIC says this will allow additional time for the Federal Government to implement the reforms to litigation funding schemes, and to avoid any disruption that could adversely affect plaintiffs or interfere with the timely and efficient running of litigation.
"My expectation, in discussions with Treasury officials, is that we will see the Federal Government pass these regulations before 30 June," said John Walker, the executive director of litigation funders IMF Australia.
Walker added his company already complies with the relevant areas of the Act.
ASIC's recent decision to extend the interim class order relief period is a direct result of the repercussions following a full-bench Federal Court decision in October 2009 in the case of Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd. The Full Federal Court found that private entities involved in litigation were participating in an unregistered managed investment scheme and were therefore in breach of the Corporations Act.
This ruling meant that litigation funders would be required to hold Australian Financial Services Licenses, threatening the conduct of current and future class actions.
Shortly afterwards, ASIC put in place transitional arrangements that guaranteed the litigation funding arrangements of class actions threatened by this Federal Court ruling. Chris Bowen, then the Minister for Corporate Law, bailed the litigation funders out by announcing that he would reverse the decision of the full bench of the Federal Court, carving out class actions and proof of debt arrangements from the definition of a managed investment scheme in the Corporations Act.